If Jamie Dimon Lived in Iceland, He Might Be Facing Jail Time

It should come as no surprise that Iceland, a country that's happy to prosecute its own prime minister over gross negligence relating to actions leading up to the financial crisis, is also more than happy to put a few former bank CEOs in the dock.

JPMorgan Chase CEO Jamie Dimon should count his lucky millions he doesn't live a few thousand miles farther east.

The iceman comethThe Wall Street Journal is reporting that Iceland's special prosecutor is indicting two former CEOs for "stock price manipulation and securities fraud" relating to the financial crash, which Iceland experienced as intensely as any other country.

The special prosecutor alleges that the CEOs and other staff lent money to people so they could buy stock and prop up share prices. In March 2012, the tiny country put former prime minister Geir Haarde on trial for "gross negligence" in matters relating to the crash, which caused three of its biggest banks to fail, and sent the country into drastic recession.

Too big too jailDoes any of this behavior sound familiar? Irresponsible actions at many of our biggest banks wreaked similar havoc across our own banking system and economy. So why hasn't the U.S. seen any of its bank CEOs, let alone any of its politicians, go on trial for similar charges?

What everyone has suspected for years was actually confirmed several weeks ago by Attorney General Eric Holder: not only are our biggest banks too big to fail, they're also too big to jail. In congressional testimony, Holder said that fear of repercussions to the economy have prevented the Justice Department from pursuing criminal cases against top management.

Imagine Jamie Dimon sitting in the dock in federal court, day in and day out for weeks or months, with investors and the country waiting on pins and needles to see whether or not he's going to go to jail. Would the stock crash? Would depositors pull their money? Would it cause a run that would necessitate the federal government stepping in -- again -- with bailout money?

The same could be said for a case against Lloyd Blankfein, CEO of Goldman Sachs. And if you put Ken Lewis, the former CEO of Bank of America on trial, who's to say how that might affect the solvency of the superbank now, even though Lewis is gone? Because once you open this Pandora's box of criminal prosecutions, depositors and investors might rightly think, where does it all stop?

Foolish bottom lineI hate to say it, but Holder is probably right, at least as far as the system stands right now. There is too much risk to the economy to put current or former top management on trial for crisis-related behavior, though its arguable that jail time is the only way to seriously curb bad-banking culture.

Sure, we've seen lots of fines levied, but none big enough to seriously injure any banks. And again, you really can't levy fines like that for the same reason you can't criminally prosecute CEOs: You might tip the bank, and the economy, over into failure.

I'm not saying Dimon or Blankfein or anyone should be criminally prosecuted, but U.S. banks are still too big to fail, and -- now we know -- too big to jail. So how is any financial institution ever to be held truly accountable for anything moving forward? Jamie, count your blessings, at least for now.

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Fool contributor John Grgurich owns shares of Goldman Sachs and JPMorgan Chase & Co. Follow John's dispatches from the bleeding heart of capitalism on Twitter @TMFGrgurich. The Motley Fool recommends Goldman Sachs. The Motley Fool owns shares of Bank of America and JPMorgan Chase & Co. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a lovely disclosure policy.